Muras Matters: Company Cars – Changes to Advisory Fuel Rates

February 27, 2018

Company Cars

Changes to Advisory Fuel Rates

This Bulletin is aimed at company car drivers (and their employers) who are not provided with fuel for private mileage

HM Revenue and Customs (HMRC) have changed their advisory fuel rates for company cars with effect from 1 March 2018. The rates are intended to give guidance to employers about what is an acceptable fuel allowance to reimburse employees for use of fuel, without creating a tax or NIC problem, when on business in their company car.

Background

Where an employer reimburses fuel to an employee using their company car on business, HMRC accepts there is no taxable or NICable benefit as long as the rate paid per mile is no higher than the relevant advisory rate. If, however, the actual cost of the fuel used is in excess of the advisory rate a higher allowance can be paid as long as the employer has detailed records to justify the higher payment.

Where an employer pays for all fuel for a company car but requires an employee to reimburse any private travel, HMRC accepts there is no taxable fuel benefit if the reimbursement is at the appropriate advisory rate, as long as the engine size is 3 litres or less. In exceptional cases, where the engine size is greater than this and the actual cost of fuel is in excess of the advisory rates (and hence an insufficient amount has been reimbursed by the employee), HMRC may argue a higher repayment rate should apply.

It is important to note that, under both circumstances, detailed mileage records should be maintained to substantiate any mileage claim or repayment.

Rates and date of change

HMRC review the rates every quarter as follows – on 1 March, 1 June, 1 September and 1 December.

With effect from 1 March the revised advisory rates are as follows:

Engine size

Petrol/hybrid

LPG

1400cc or less

11p

7p

1401cc to 2000cc

14p

8p

Over 2000cc

22p

13p

Engine size

Diesel

1600cc or less

9p

1601cc to 2000cc

11p

Over 2000cc

13p

If you would like further information regarding the application of the advisory rates please contact our Tax Director, Jenny Marks.

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